Discovery Watch is a weekly 15-30 minute audio show produced by HoweStreet.com where Jim Goddard interviews John Kaiser about resource juniors with projects that have caught John's attention. The projects will not be limited to companies he has covered through the Spec Value Rating System. Jim and John will periodically circle back to review the projects and if necessary close them out as no longer worth watching. Check out the catalog of KRO Free Stuff. KRO offers a USD $450 Annual Individual Membership. This Discovery Watch session is available via YouTube or Podcast.
New money continues to shun the resource junior sector which does not lend itself well to momentum gambling unless gold is trending higher, with capital inflows slowing when the gold price stalls and reversing whenever gold suffers a pullback. Even then the momentum crowd is attracted mainly to juniors with advanced projects undergoing feasibility demonstration because investors can see the valuation impact of a future higher metal price. But this fundamental valuation basis for a mine also limits momentum gambling compared to "tradeables" like Bitcoin and "winner take all" concept stocks because it is too easy for shareholders and short-sellers to see when a future mine's valuation is too high. Momentum gambling does kick in when a junior makes an exploration discovery that appears to have lots of size potential. Novo's Pilbara Wits 2.0 discovery achieved this characteristic, but fizzled when the measurement problem could not be solved. The initial uncertainty about how big the size of the prize can become triggers what is called S-Curve activity, which is the tendency of a junior to achieve a peak valuation during the discovery delineation stage that matches what the discovery ends up being worth after it has been marched through all the feasibility demonstration stages of the exploration-development cycle. Until a junior delivers a discovery hole whose implications are immediately evident, the market has to treat the junior as a vehicle for fundamental outcome gambling. This means coming up with a potential plausible outcome, quantifying it in monetary terms, and understanding the milestones and associated timelines needed to validate the potential outcome. NuLegacy Gold Corp and Nevada Exploration Inc are KRO Favorites because they are chasing world class scale Carlin type discoveries in Nevada based on well thought out targets. NUG dropped sharply on Friday after reporting that the first 3 core holes along a 3.5 km target failed to intersect a Goldrush Clone, namely a long, fat brecciated cigar loaded with gold mineralization. Although assays for 5 holes within the Rift Anticline are still pending, the market is expecting more of the same, hence the harsh reaction. My NuLegacy Goldrush Clone Outcome Visualization showed the valuation upside for the stock if drilling yielded evidence of a Goldrush scale discovery. NUG is now where NGE ended up after completing 10 core holes at South Grass Valley in 2018-2019. Both started out as geologically blind targets. In the case of NGE the target under basin gravel cover was generated by a groundwater sampling program. Drilling revealed that the gravels were hiding a highly altered Lower Plate window at bedrock, unlike the outcropping unaltered Lower Plate rocks to the south that had received unsuccessful exploration attention in the past. But investors were not rewarded with a bi, fat Goldrush cigar, just lots of Carlin pathfinder smoke and whiffs of ppb gold here and there but not enough to convince anybody that this Carlin system was fertile with gold. NGE followed up with a shallower RC program in 2020 which indicated the direction of the fluid flow and led them to the East Golden Gorge target along a 3.5-4.0 km structural feature they call the Water Canyon Corridor. This target is deeper than the layer cake tested by the core and RC holes because the layer cake plunges into the WCC. NGE completed one hole (#12)at the northeastern end of the grid which confirmed their structural model for the western side of the WCC and delivered a long very arsenic juiced up interval in the CLM formation, which is this region's likely Wenban equivalent. Assays are due and may even be in hand. At this point they do not need to yield an ore grade interval, just proof that the SGV hydrothermal system is fertile with gold. A second hole (#13) was started at the southern end of the WCC but it has been stranded in gravel just above bedrock for more than a month after the drill crew bolted for a better job elsewhere. Hole #13 is arguably in a much better location than #12 because it will test where the CLM plunges into the WCC on the eastern flank of a Jurassic intrusion which would have crackled the layer cake a lot more than 3.5 km to the north. For NGE's East Golden Gorge target I created a North Carlin Deep OV which imagines finding smaller very high grade zones such as Deep Post, Meikle and Rodeo. This is a much higher value potential outcome than a Goldrush Clone, and it is the type of outcome NuLegacy will likely refocus towards once it has all the assays and constructed a geochemically contoured 3D geological model of what is going on at Rift Anticline. That means a 2-3 month wait before we find out where NUG's team thinks the sponges that soaked up ore grade gold are located. The market's negative reaction reflects the realization that Rift Anticline is no longer about shooting a Goldrush koi in a barrel, but fishing for much harder to catch smaller but fancier fantail goldfish.
I'm giving Discovery Harbour more attention because they are half way through their 6 hole Caldera drill program that targets the boiling zone at a 300-500 m vertical depth below modest gold zones at surface in the hope that Sleeper style bonanza grades evolved in this low sulphidation epithermal system. All historical drilling has been shallow with the most recent efforts killing off the potential for another open-pittable disseminated Round Mountain deposit. The program will be done by the end of September, with assays arriving from mid October through November. They already know Caldera is fertile with gold but what they do not know is if bonanza veins that piled up gold evolved within the untested deeper boiling zone. Sleeper is an LSE system found under gravel in northern Nevada which is a linear structurally controlled high grade deposit surrounded by an envelope of considerably lower grade disseminated mineralization. Because the depth of such a system at Caldera will be beyond open-pit mining, I have created a Caldera 1,500 tpd UG Sleeper Clone Outcome Visualization that just assumes the high grade portion of the Sleeper system. What intrigues me about Discovery Harbour, is that Newcrest, which has optioned up to 75% of the Fortuity 89 project out on the gravel flats to the west of Caldera, hopes to mount a similar 7 hole RC program testing 300-500 m beneath the LSE style altered outcrop in October, provided it can get hold of a drill rig and crew. I have applied the same Sleeper deposit and cost assumptions to create a Fortuity 89 1,500 tpd UG Sleeper Clone OV to demonstrate the difference net interest makes for the upside stock price potential. If Newcrest gets its drill program underway in October, which will liekly also take two months to complete, Discovery Harbour shareholders will be in a position to benefit from a discovery hole well into Q1 of 2022. S-curve style momentum gambling, as with NGE and NUG, will not erupt until a clear cut discovery hole is delivered. But Discovery Harbour is now in the timeline zone to justify fundamental outcome gambling.
Disclosure: JK owns Nevada Expl Inc; Nevada Expl and NuLegacy are Bottom-Fish Spec Value rated Favorites; Discovery Harbour is Bottom-Fish Spec Value rated